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The electric vehicle industry has been rapidly developing internationally due to a confluence of factors such as government support, industry shifts, and private consumer demand. The automobile industry in China has also begun to develop a large and reputable electrical vehicle sector, supported by both the private and public sector.
Contents
History
China's first subway was constructed in Beijing in the late 1960s, nearly one hundred years after its initial development in London. By 1984, 66 major subway systems existed worldwide. Urban rail transit helped ease the immense pressure caused by urban traffic congestion, while allowing commuters to travel at great speed and convenience. Tianjin was the second city to have an urban rapid transit system and Shanghai was the third, the latter opening its Metro in 1995 that incorporated both subway and light railway lines.
Electric bike and motorcycle development in the 90s
The two principal types of two-wheeled vehicles in China: two-wheel bicycles propelled by human pedaling supplemented by electrical power from a storage battery (bicycle-style), and low-speed scooters propelled almost solely by electricity (scooter style). The technology of both types is similar. China's two-wheeled electric vehicle industry started under the planned economy of the Maoist 1960s. However, early efforts to develop and commercialize electric these vehicles failed. A group of entrepreneurs gathered during the 1980s to revive the fledging industry but their ambitions were thwarted by poor technology and limited government support.
By the 1990s, China witnessed the world's most spectacular growth in two-wheeled electric vehicles and annual sales of bicycles and scooters grew from fifty six thousand in 1998 to over twenty one million in 2008. In 2008 only, Chinese bought 21 million electric-bikes, compared with 9.4 million autos.
This growth of electric-bicycles in China was less technology-driven and more policy-driven, facilitated by favorable local regulatory practices in the form of gasoline powered motorcycle bans and loose enforcement of electric bicycle standards. The alleged justifications for these bans included relieving traffic congestion, improving safety and reducing air pollution. Many Chinese cities started to ban or restrict motorcycles and scooters using a variety of measures: some cities suspended the issuance of new motorcycle licenses, others banned the entrance of motorcycles and scooters into certain downtown regions or major roads, and some capped the number of licenses and then auctioned the license plates that were available. These bans were imposed on all motorcycles, regardless of their power sources, and since electric-bikes are categorized as non-motor vehicles they were exempt from the bans. According to the motorcycle committee of the Society of Automotive Engineers of China, the use of motorcycles is now banned or restricted in over ninety major Chinese cities.
In fact, the government further supported the use of electric-bicycles by including them as one of 10 key scientific-development priority projects in the country’s ninth Five-Year Plan. Some insiders claim that their development had the personal endorsement of former Premier Li Peng. In addition, improved technology, low barriers to entry, decreasing purchase price, and urban living were factors that furthered the popularity of electric-bicycles as a transportation mode. First, bicycle technology - specifically for motors and batteries - improved significantly during the late 1990s and this, coupled with a vast supplier base and weak intellectual property protection, increased competition. An increase in competition drove down the price of electric-bicycles and at the same time, a rise in gasoline prices made them more competitive economically with alternatives like gasoline-powered scooters or cars. An increased influx of workers to urban areas further increased demand for an affordable, motorized, and convenient form of private mobility since traveling by bicycle or bus in congested areas or across long distances was no longer viable.
Recently, restrictions on electric-bicycles in China have been gradually spreading and there is a growing concern amongst consumers that the government may impose an outright ban. Nevertheless, since they are an important mode of electric transportation, the experience found with electric-bicycles offers important lessons for the launch of other types of electric vehicles.
Political background and government support
According to the China Association of Automobile Manufacturers, China surpassed the United States to become the world’s largest automobile market in 2009 with a record 13.9 million vehicles sold in the country, compared to 10.43 million cars and light trucks sold in the United States. There is a quickly growing demand for transport in China as more people can afford to buy cars. To support its commitment to encourage electric-vehicle development the government will provide US$15 billion to the industry. Their intention, in addition to creating a world-leading industry that will produce jobs and exports, is to reduce urban pollution and decrease its dependence on oil. As such, government’s goal is to have five million battery-electric and plug-in hybrid electric cars on the road by 2020, while also producing one million such vehicles annually by 2020.
The government has established a policy framework to accelerate electric-vehicle technology development, while encouraging market transformation that will support research and development, regulate the industry and encourage consumption.
The milestones in government support for the electric-vehicle industry are numerous:
• China starts the "863 EV Project" (pure EV, hybrid EV, and fuel cell vehicles are included)
• National Development and Reform Commission publishes Auto Industry Development Policy • Sixteen Chinese state-owned companies formed an electric vehicle industry association in Beijing called www.ceva.org.cn/EN. The goal of the association is to integrate technological standards and create a mechanism through which stakeholders share information in order to develop a top of the market e-vehicle. The companies are anticipated to invest a total of USD14.7 billion on the growing electric vehicles market by 2012.
• China invests over RMB2 billion (USD300 million) in new energy vehicle development.
• Sales volume of Chinese new energy vehicles surges to 366 units in the first half of 2008, reaching a year-on-year increase of 107.9%. Chinese automakers provide around 500 independently developed new energy and fuel efficiency vehicles to serve Beijing Olympics. • 13 cities (Beijing, Shanghai, Chongqing, Changchun, Dalian, Hangzhou Jinan, Wuhan, Shenzhen, Hefei, Changsha, Kunming, and Nanchang) are chosen as pilot cities for new EV usage in 2009.
• The State Council approves the Auto Industry Restructuring and Revitalization Plan to invest RMB10 billion (USD1.50 billion) for new e-vehicle industrialization. • The State Council invests RMB20 billion (USD3 billion) in technique development. • To improve air quality and reduce reliance on fossil fuels, the government announces a two-year pilot program of subsidizing buyers of alternative energy cars in five cities (Shanghai, Changchun, Shenzhen, Hangzhou and Hefei). The subsidy for EV customers is RMB60,000 for battery electric vehicles (BEV) and RMB50,000 for plug-in hybrid vehicles (PHEV).
• An auto industry (including new energy) development plan for 2011 to 2020 was drafted to include a plan to transform the domestic auto industry. Approval has been delayed. • China plans to expand a project of encouraging the use of energy-efficient and alternative-energy vehicles in public transport to 20 cities from 13. EV).
Environment concerns and Chinese oil demand
Developing electric-vehicles will assist energy conservation and security in China since energy efficiency is 46% higher than that of internal combustion engines (ICEs). Electric-vehicles also have the potential to reduce carbon dioxide emissions by 13-68%: directly, through advanced V2G (vehicle-to-grid) technology and indirectly, through peak shaving.
Developing electric-vehicles will also reduce China’s reliance on oil imports. China became a net oil importer in 1993, the world’s second-largest petroleum consumer after the United States in 2004, and imported 52% of its oil by 2009. The International Energy Agency projects that Chinese oil consumption will more than double from 7.7 million barrels per day (1,220,000 m3/d) in 2008 to 16.3 million barrels per day (2,590,000 m3/d) by 2030. At the same time, it became the largest automobile market in the world by the end of 2009 and McKinsey estimates that China’s vehicle fleet will increase tenfold between 2005 and 2030.
As the demand for cars continues to grow in China, the associated demand for gasoline will put continual pressure on China’s energy security. China is building its own Strategic Petroleum Reserve (SPR) that can hold 100 million barrels (16,000,000 m3), about enough to supply its oil needs for 20 days, and also plans to build eight additional coastal oil reserves by 2011 to increase its total emergency supply to 281 million barrels (44,700,000 m3). At the same time, China is encouraging and supporting the development of alternative energy options, especially in terms of electric-vehicle development, because they anticipate the rise of new fuel technologies and greater fuel efficiency will give them greater energy independence. According to Wan Gang, Minister of Science and Technology, "green vehicles are key for the development of China's auto industry as auto exhaust emissions already account for 70% of the country's air pollution in major Chinese cities."
Value chain
The Chinese government has developed a plan to make China one of the leading producers of electric and hybrid vehicles by 2012. The goal meets two basic needs: to improve the environment and save energy at home, and to transform Chinese automakers into major players in the global automobile industry. Although China already has one of the largest automotive industries in the world, one of its biggest shortcomings is its outdated gasoline engine technology. Transitioning to large-scale electric-vehicle activity could give China a competitive advantage over the West.
Capitalizing on the low barriers to entry in the industry, stakeholders are establishing credibility in the manufacturing of electric-vehicles. However, there has also been a recent push in China to complement manufacturing with defined segments across the value chain including energy storage, energy infrastructure, distribution, and value added services.
Energy storage
E-vehicles use only basic motors and gearboxes, and have relatively few parts. Compared to traditional vehicles they are cheaper and easier to build. However, building a high-quality battery that has endurance is the challenge.
BYD Company is a Chinese company that builds rechargeable batteries using a new technology that, according to the company, makes them safer than other lithium-ion models. In 2005, it became the world’s leading small battery company and is one of the world’s largest manufacturers of rechargeable batteries. It is emerging as a leader in the technology sector.
Tianjin Lishen Battery Joint-Stock Co. Ltd. is another China based battery manufacturer. The company has a partnership with Coda Automotive, a California based company, to develop a Coda electric vehicle and ultimately, batteries for use in electricity generation. The focus of the latter will be to provide energy storage for wind and solar energy generation.
In 2017, the government battery subsidies fell by 30% and Chinese EV sales dropped.
Energy infrastructure
While the shape of this industry is still emerging, electricity generation and the infrastructure to deliver energy appear to be the areas with the highest potential and relevancy to manage future energy use. According to consulting group Oliver Wyman, "some utilities are already engaging a specific area of the value chain, setting priorities for near-term, medium-term, and long-term initiatives. They have begun to model different market and business impact scenarios, with the goal of identifying the biggest upsides and pitfalls."
Utilities have begun to develop focused strategies in areas where they are well positioned to serve the electric-vehicle value chain. At the moment, a variety of business design ideas are competing to shape the new marketplace. China has invested a great deal into this fundamental component of the value chain, and some of the principal facilitators are as follows:
An electricity provider, year-end 2009, the Company finished approximately six billion kilowatt-hours of on-grid electricity, and had an attributable installed capacity of 1.5 million kilowatts, including 1.4 million kilowatts of thermal power and 100,000 kilowatts of hydropower.
The Company develops, manufactures and sells software and hardware products serving the power industry, and also provide system integration services. It also provides software and hardware services and system integration services for things such as power grid dispatching automation products, electricity market commercial operating systems, and electrical control automation products.
This Company is primarily engaged in research, development, manufacture and distribution of automation, protection and controlling products for electric power systems. Specifically, it provides power grid and power generation equipment, transformers, electrical systems, power distribution network products, electrified railway products and direct current (DC) power distribution systems.
Multibrand and multimaker distribution and value added services
China is implementing policies that advocate diversified energy sources for use across industries. In a parallel effort, private companies are introducing innovative ways that support the use of clean energy. To bridge the gap between the customers and suppliers, Shanghai based company TZGEV has introduced distribution and value added services that integrate and streamline resources from electric-vehicle carmakers and related equipment suppliers in the private and public sectors. Recognizing a need for activity across the electric-vehicle value chain, they are offering EV's for sale and for rent, technical repair and maintenance, and value added services inclusive of fleet management.
Challenges to the industry
The Climate Group has published an extensive report regarding the challenges that can be summarized into four factors: How can the bottlenecks in technology and industrialization be addressed? Can China catch up to the West in design, research and development, manufacturing of key components and the vehicle assembly? Can China create a large-scale infrastructure to support the industry? And can China reduce the price so that e-vehicles are competitive and accessible?
One of the biggest challenge is the decreasing prices of competing fuel such as Gasoline, due to decrease in crude oil prices. Crude oil prices are currently softening and may soften further in future. Globally, the share of Electric Vehicles in around 1%, but the global majors are still expanding capacity, which is not the case in China except some players such as BYD, Zongshen Group, SAIC etc.